Trade war threatens Middle East oil prices and economic stability
- The global trade war has led to increased uncertainty and rising import costs for Middle Eastern countries with dollar-pegged currencies.
- Oil-exporting nations are likely to face future challenges as global trade slows, impacting oil demand.
- There are negative implications for economies heavily reliant on oil revenues, indicating the need for continued diversification and reform efforts.
The global trade war, instigated by U.S. President Donald Trump, has emerged as a significant threat to the economies of the Middle East, particularly affecting nations with currencies pegged to the dollar. These countries, including Saudi Arabia, the UAE, Qatar, Oman, and Bahrain, are grappling with rising import costs as oil prices face downward pressure. Analysts predict that the slowdown in oil demand will be exacerbated by weakened global trade, a situation made more precarious due to high levels of external debt in countries like Lebanon, Jordan, and Egypt. These nations risk acute economic pain as their dependence on oil revenues further ties them to fluctuating global market conditions, threatening stability. Economic forecasts indicate that despite efforts to diversify and reform their economies post-2014 oil price shock, the current uncertainty surrounding global tariffs and trade relationships is causing concern. The macroeconomic outlook for the Middle East and North Africa (MENA) region continues to be under pressure from the ramifications of the trade war. Analysts note that ongoing tariff and macro pressures could further undermine Brent oil prices, intensifying the challenges for these economies. Countries like Jordan, which specializes in exporting textiles and jewelry, are particularly vulnerable due to their heavy reliance on American markets. About 25% of Jordan’s exports go to the United States, making it the most exposed economy to the repercussions of potential tariffs. This situation could force Jordan into negotiations to mitigate damage from these external shocks. In contrast, some analysts expect fast-growing trade corridors, such as the GCC-Asia trade corridor, to benefit from these challenges, as regional trade grows despite the issues affecting the global market. As the Gulf states seek to maintain their economic ties with the U.S. to shield themselves from tariff fallout, the strategic implications of the trade war continue to unfold, with the potential for further economic cooperation and dependency emerging in the coming years.